The 5 essential KPI’s for FMCG market
Writen by Ángela ·
The FMCG market is characterized by important volumes, generally in a very large geographical area and involving a lot of different actors.
In this context, making a diagnosis of the state and health of your business may seem complicated. Nevertheless, the task is easier than it seems: you need to focus on the right indicators in order to properly analyze your performance.
Also, to help you make the best decisions for your business, we have prepared a presentation of the most important KPI’s of the sector.
Percentages of distribution
The percentage of distribution can be expressed numerically, or in weight. The analysis of these two combined notions gives the state of the distribution network of a product and the competitive position of a brand on the various distribution channels.
1. The numeric distribution percentage is the percentage of stores holding my product in a given geographic area.
It is the ratio of the number of stores distributing my product to the total number of stores in the zone.
The higher the percentage of numeric distribution, the more my product is in store. Nevertheless, this data should be analyzed regarding the positioning of the brand. An exclusive brand may choose a selective distribution and will have a low numeric distribution percentage.
The analysis of this indicator also changes according to the performance of the stores given by the weight distribution.
2. The weighted distribution percentage corresponds to the turnover part of a global market for a product category made by the stores distributing my product.
Indeed, being distributed by stores that provide a large part of the sales of a category of products is much more interesting.
To draw a complete analysis of these notions, it is necessary to compare them to one another: the goal is for the weighted distribution to be higher than the numeric distribution.
For example, if you have a weighted distribution of 90 but a numeric distribution of 10, this indicates that your product is only distributed in 10% of the stores distributing this category, but that the stores where your product is sold represent 90% of the sales of this universe.
In this case, you will be in a highly concentrated market: very little presence in the store, but you cover 90% of the market’s potential. This is the ideal case: you will have costs of supply and animation that will be perfectly controllable because you know the points of sale.
If not, imagine the situation where a product has a numeric distribution of 80 but a weighted distribution of 20: that means that your product is distributed in 80% of the places selling this type of product, but these stores only make 20% of the universe’s revenue. The distribution policy is failing:
- bad negotiation with retailers
- mismanagement of sales forces
- wrong choice of points of sale
- bad sales promotion
This type of indicator therefore makes it possible to assess the quality of the distribution of a brand and to assign objectives to the sales force.
Holder’s market share
Market share in value is an essential indicator; it measures the power of a company, a brand, or a product on the market.
It represents the percentage of the company’s sales relative to the total sales of the sector.
3. Holder market share represents the value of the company in the market regarding its level of distribution.
It is obtained by dividing the market share in value by the weighted distribution.
For example, if I hold 5% of the market but my product is only present in 10% of the stores distributing its category, my market share holder will be equal:
My owner market share is therefore equal to 50%.
Holder market share compares the market share of two brands by smoothing these market shares by the distribution level. The owner’s market share also makes it possible to quantify what a point of sale can bring, which is always very useful when it comes to motivating salespeople.
The consumption indicators
4. The penetration rate of a product is the percentage of households, individuals or consumers who buy the product or brand. It is equivalent to the ratio of the number of current customers to the number of potential customers.
The evolution of the penetration rate of a product is notably studied to measure the effectiveness of an advertising campaign or a promotional operation. The penetration rate is also used to measure the potential of a market still to be conquered.
5. The share of wallet is, for a given product, the share of the purchases that the customers of a mark devote to this mark. It is therefore a reflection of the loyalty of customers, their commitment to the brand.
If for a brand, the share of wallet is 80% it means that for this type of product customers of the brand are loyal to it 4 times out of 5, when the purchase quantities are constant. It allows us to measure the exclusive character of fidelity.
These indicators and their analysis will influence the decisions of the FMCG players. To facilitate the adaptation of strategies, it is possible to use Location Intelligence tools.
Indeed, if the relationship between numeric distribution and weighted distribution reflects a problem in the distribution of your product, Location Intelligence gives you instant access to a ranking of points of sale distributing your product. You can then identify problem areas to assign goals to your sales force.
In addition, if the penetration rate of your product is low, showing significant growth potential, and you want to develop your distribution network; or if your share of wallet rate is low, and you want to find points of sale closer to your target customers; the Location Intelligence will allow you to determine without effort the areas corresponding to the socio demographic criteria representative of your target customers.
If you want to learn more about how Location Intelligence can help you implement your strategy, do not hesitate to request a demo.